Abstract This article comments on the importance of the independence of auditors to the credibility of financial reporting and the capital formation process. The concept of auditor independence under the Federal securities laws, therefore, was designed not only as a means to have better financial information reported to the public, but also to enhance investors' perceptions regarding the reliability and accuracy of that information. Starting from this vantage point, it is easily understood why the staff resisted the approach taken by the AICPA Committee that independence issues should be viewed from tbe standpoint of a reasonable auditor. To the staff, the key question is whether a reasonable investor, knowing all the facts and circumstances, would consider the independent accountant to have impartial and objective judgment on the questions confronting him or her during the audit. The independence rules promulgated by the AICPA and SEC principally address the appearance of independence because it is impossible to regulate an individual's state of mind. The independent mind set, however, is the most basic independence requirement. The advocacy of weak and unsupported client accounting positions speaks loudly about independence in fact.
Walter P. Schuetze (Tue,) studied this question.